2010 (1) TMI 1065 - AT - Central Excise

CENVAT credit - Since the appellants do not maintain separate accounts in respect of inputs used in the manufacture of final products and exempted goods, the appellants are required to pay 10% of value of Iron Ore Fines and Coke Breeze as per provisions of Rule 6(3)(b) of CCR 2004

Summary

Issues:
1. Whether the process of screening Iron Ore and Metallurgical Coke resulting in Iron Ore Fines and Coke Breeze amounts to manufacture, leading to the clearance of exempted and dutiable products without payment of duty.
2. Whether the demand for payment of 10% of the value of Iron Ore Fines and Coke Breeze under Rule 6(3)(b) of Cenvat Credit Rules, 2004, with interest and penalty, is justified.
3. Whether Cenvat credit can be denied when waste is cleared without payment of duty.
4. Whether undue hardship has been established to warrant a stay under Section 35F of the Central Excise Act, 1944.

Analysis:
1. The appellants, engaged in Pig Iron manufacturing, generate Iron Ore Fines and Coke Breeze during the screening process of raw materials. The Department contends that this amounts to manufacture, necessitating payment of duty on the resultant products. The impugned order demanded 10% of the value of these products under Rule 6(3)(b) of Cenvat Credit Rules, 2004, for the period from April 2005 to June 2008, invoking the extended period under Section 11AB of the Central Excise Act, 1944, along with penalty. The Tribunal considered arguments on whether Iron Ore Fines and Coke Breeze are waste or final products, citing relevant precedents. The appellants relied on decisions emphasizing that waste clearance without duty payment does not warrant Cenvat credit denial, citing the Rallis India Ltd. case and the Narmada Gelatines Ltd. case. The Tribunal found these arguments persuasive and remanded the matter for fresh adjudication, noting the Commissioner's failure to consider these precedents initially.

2. The Department argued that the appellants failed to establish undue hardship for a stay under Section 35F of the Central Excise Act, 1944. The Tribunal analyzed the legal principles surrounding undue hardship, citing the Benara Valves Ltd. case and the Bhavya Apparels Pvt. Ltd. case. The Tribunal emphasized the need to assess undue hardship on a case-by-case basis and highlighted the importance of fairness and public interest in granting interim relief. While the Department contended that the appellants did not demonstrate undue hardship, the Tribunal found that the appellants' case had merit based on legal interpretations and remanded the matter for further consideration on merits.

3. The Tribunal considered the applicability of Rule 6(3)(b) of the Cenvat Credit Rules, 2004, in demanding 10% of the value of Iron Ore Fines and Coke Breeze cleared without duty payment. Relying on decisions in similar cases, the Tribunal concluded that the appellants were not liable for the demand as the waste generated during manufacturing did not attract the said Rule. The Tribunal highlighted the need for the original adjudicating authority to consider these precedents and CBEC guidelines before making a final decision. Additionally, the Tribunal held that the extended period could not be invoked, and penalty was not warranted, indicating a lack of intent to evade duty.

4. The Tribunal discussed the issue of undue hardship in seeking a stay under Section 35F of the Central Excise Act, 1944. While the Department argued that the appellants did not establish undue hardship, the Tribunal emphasized the need to assess each case individually and consider factors such as fairness and public interest in granting interim relief. The Tribunal found merit in the appellants' legal arguments and remanded the matter for further consideration on the grounds of interpretation of law and facts.